{"id":52221,"date":"2016-05-19T02:41:55","date_gmt":"2016-05-19T00:41:55","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/invest-with-style-and-outperform\/"},"modified":"2019-12-31T00:44:32","modified_gmt":"2019-12-30T23:44:32","slug":"invest-with-style-and-outperform","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/invest-with-style-and-outperform\/","title":{"rendered":"Invest with \u201cstyle\u201d and outperform"},"content":{"rendered":"

Investment \u00ab styles \u00bb aim to capture risk premia and\/or market anomalies that can be seen structurally over long
\nperiods. While no formal classification exists, a distinction is traditionally made between four major style families,
\nnot only applicable to equities but also to other asset classes: Value, Size, Carry and Momentum (for more details
\nread also Style portfolios, a solution to the conventional asset allocation dilemma?<\/a>).<\/p>\n

The Value strategy consists in picking assets that seem relatively undervalued, and is therefore based on a
\nmeasurement of the gap between the fundamental value of the assets and their market price. <\/p>\n

The Quality<\/strong> strategy is picking assets on solidity\/stability criteria at any price.<\/p>\n

The Momentum<\/strong> and Low Vol<\/strong> strategies are exploiting investors\u2019 behavioural biases: the first one picks assets
\nthat have performed best over the last 12 months, and the second one, assets that were least volatile over the
\nlast 6 months.<\/p>\n

The Size<\/strong> strategy is inspired from the work of Fama-French and picks assets with the smallest market caps.<\/p>\n

The High Div<\/strong> strategy is a Carry strategy and picks assets offering historically the highest dividends.<\/p>\n

\"share_selection_criteria.jpg\"<\/a><\/p>\n

We will focus here on styles in the European equity universe (shares picked in the Stoxx 600). In their long only
\nversion (basket of 50 shares picked on the basis of above criteria), these strategies historically outperform
\ntheir benchmark indices<\/strong>.<\/p>\n

With the exception of the Low Vol strategy, the strategies show, in terms of historical volatility, levels equivalent
\nto the traditional European indices, and all of them therefore show higher Sharpe ratios (ranging between 0.6 and
\n0.9). For some strategies (Momentum, Small Caps and High Div), these performances offset a risk of asymmetry
\n(more negative skewness than the benchmark(s)). Lastly, these Long Only strategies obviously post a high
\ncorrelation to the market (average beta to the Euro Stoxx 50 ranging from 0.55 to 0.93). In the long term,
\nstyle strategies outperform their benchmark indices, but keep naturally a high beta to them.<\/strong><\/p>\n

\"style_strategies_long_only_applied_to_stoxx_600.jpg\"<\/a><\/p>\n

In a second version (\u00ab market neutral \u00bb), we will neutralize this beta to keep only the premium that is found in these strategies.<\/strong><\/p>\n

We then study \u00ab market neutral \u00bb strategies consisting of :<\/p>\n